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Note: As explained in the opinion, the National Benevolent Association of the Christian Church (Debtor/Applicant/Plaintiff) "owned and operated eleven senior-care facilities, three special-care facilities for individuals who are developmentally disabled, and four children's-care facilities. [Debtor] also managed more than seventy adult low-income residential housing projects under a contract with the [US] Department of Housing and Urban Development ("HUD")." It obtained financial standbys assuring payment of interest and principal from KBC Bank of New York (Issuer), totaling approximately US$63,000,000 to finance its variable rate bonds. The indenture trustee was UMB Bank and Debtor maintained a revolving line of credit with the First Bank of St. Louis.

Between 2000 and 2003, Debtor incurred significant losses and expected that its letters of credit would not be renewed at an upcoming credit review, in which event, the variable-rate bonds subject to a mandatory purchase that would be funded by drawings on the LCs, obligating Debtor to reimburse Issuer in two years.

As a result of this expectation, Debtor hired a New York investment adviser, Weil, Gotshal & Manges, LLP (Attorneys), a law firm, and its partner in charge, Deryck Palmer, to advise Debtor on the pending letter of credit review, and Huron Consulting Group (Consultant) to perform accounting and financial analysis. Attorneys' Partner in Charge instructed Debtor "to cease all direct communications with the bankers".

After Issuer requested an application for renewal of the standbys, Consultant completed a review of Debtor's financials and submitted a proposed business plan to Attorneys, which was to be given to Issuer after Attorneys secured a confidentiality agreement with Issuer. Although Issuer signed the agreement, Attorneys allegedly refused to provide Issuer with the proposed business plan, causing Debtor to miss the renewal deadline and binding it to the mandatory purchase provision. Debtor eventually filed for bankruptcy and was forced by its creditors to sell its senior living centers. In over one year, total professional fees for Attorneys amounted to approximately US$34,000,000.

Debtor brought an adversary action against Attorneys alleging malpractice on numerous theories, including negligence by Attorneys in causing Debtor to miss the letter of credit renewal deadline.

Debtor alleged "that Palmer was negligent in respect to the confidentiality negotiations and in permitting [Debtor] to miss the renewal deadline. [Debtor] further asserts that Palmer failed to adequately inform [Debtor] of the consequences of defaulting on the December 1st payment. [Debtor] also alleges that Palmer should have known that filing for bankruptcy would likely result in a liquidation of [Debtor]'s assets to effect full payment to its creditors. Finally, [Debtor] alleges that Palmer had advised [Debtor's] board on these decisions and that [Debtor's] board always followed his advice. [Debtor] contends that Palmer's negligence created unnecessary professional fees and prevented [Debtor] from reaching a more favorable out-of-court resolution and thereby avoiding bankruptcy."

The bankruptcy court dismissed the action on the basis of res judicata. The United States District Court for the Western District of Texas affirmed. On appeal, the United States Court of Appeals for the Fifth Circuit, Wiener, Dennis, and Clement, JJ., in a per curiam opinion, vacated the bankruptcy court's judgment but granted Attorneys' motion to dismiss for lack of subject-matter jurisdiction. The appellate court concluded that Debtor lacked the standing to bring the claim because it was a reorganized debtor, and the provisions of the reorganization plan "do not specifically and unequivocally reserve to [Debtor] the right to prosecute its claim against [Attorneys] arising out of the alleged attorney malpractice conduct that occurred prior to the [Debtor] bankruptcy petition filing and proceedings."

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